Note: Certain material, indicated by three asterisks (***), has been omitted
from this document, pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission. The omitted material has been filed
separately with the Securities and Exchange Commission.
SERVICES, SUPPLY AND SALES AGREEMENT
SERVICES, SUPPLY AND SALES AGREEMENT (the "Agreement"), dated as of
February 16, 2000, by and between Compaq Computer Corporation, a Delaware
corporation ("Compaq"), ITY Corp., a Delaware corporation and a wholly-owned
subsidiary of Compaq ("Compaq Sub"), and InaCom Corp., a Delaware corporation
("Inacom").
RECITALS
WHEREAS, Compaq Sub, Compaq and Inacom have entered into an Asset
Purchase Agreement dated as of January 4, 2000, as amended (the "Asset Purchase
Agreement");
WHEREAS, the execution of this Agreement is a condition to Compaq Sub
acquiring, and Inacom disposing of, the Purchased Assets (as defined in the
Asset Purchase Agreement) in connection with the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
AGREEMENT TO COOPERATE
SECTION 1.1. Services Agreement. Compaq agrees to assist Inacom in the
generation of incremental revenues for InaCom's service business as provided in
the Service Level Agreement dated as of February 16, 2000 between Compaq and
Inacom (the "Service Level Agreement"), and the terms of the Service Level
Agreement are incorporated by reference herein.
SECTION 1.2. Supply. In connection with Inacom's computer services
business, Compaq Sub and Inacom agree as follows:
The parties agree that when Inacom places an order with Compaq Sub for
hardware and Procurement Services, as defined below, Compaq Sub will invoice the
amount directed by Inacom and collect from the customer for the invoiced amount;
provided that Inacom, acting as an agent of Compaq Sub, shall have entered into
an agreement with the customer relating to the acquisition of such hardware and
Procurement Services, in form and substance reasonably acceptable to Compaq Sub.
Such agreement shall include a grant of a purchase money security interest in
favor of Compaq or Compaq Sub, as appropriate, on all hardware and related
software licenses supplied by Compaq Sub. From these collected amounts, Compaq
Sub will retain its sales price for hardware and Procurement Services, and pay
the remaining proceeds to Inacom as an agency fee. As used herein, "sales price"
shall mean, (i) with respect to hardware, Compaq's actual cost (excluding the
impact of volume incentive rebates) with respect to third party hardware and US1
or TOSS price, whichever is applicable, with respect to Compaq's hardware, and
(ii) with respect to Procurement Services, the fees as per the Fee Schedule. In
the event that the invoiced amounts are insufficient to cover the sales price of
the hardware and Procurement Services as per the Fee Schedule (defined below),
Inacom agrees to pay the difference to Compaq Sub.
1. Inacom agrees to make Compaq Sub its preferred provider of the
procurement services listed in Exhibit 1 ("Procurement Services"), meaning only
that Inacom shall direct at least 75% of its requirements for such services to
Compaq Sub. The obligations set forth in this Section 1.2(1) shall be subject to
Compaq Sub's ability to competitively price its services (which for these
purposes shall not require Compaq Sub to be the lowest-priced service provider)
and to satisfy Service Level Agreements for service capabilities and
performance, as mutually agreed to by the parties.
2. Inacom will pay a fee to Compaq Sub for the Procurement Services
based on the fee schedule, attached hereto as Exhibit 2 (the "Fee Schedule").
Compaq Sub agrees to provide Inacom with a fixed rate structure for the
Procurement Services, which does not depend on rebates for volume attainment. In
any event, Compaq Sub will offer Inacom the most favored procurement service
customer fees of Compaq Sub or any of its affiliates, i.e. the lowest fees which
it charges any of its customers for the Procurement Services except in the
instance where lower pricing is offered to "meet competition" in response to a
documented lower bid, as such term is commonly used in the relevant industry.
Upon reasonable notice, Compaq Sub will give Inacom's independent third party
auditor access, on a quarterly basis, to Compaq and multi-vendor sales price
information at the SKU level, including but not limited to product cost and
freight information, for the sole purpose of verifying Compaq Sub's pricing of
the Procurement Services. All such information shall be subject to the terms of
the Confidentiality and Non-disclosure Agreement executed by the parties.
3. In the event that Compaq Sub must go outside of the normal
distribution agreements with third party vendors in order to obtain third party
products, it will absorb commercially reasonable increases in product costs
associated with such procurement. If Compaq Sub determines that such costs are
not commercially reasonable, Compaq Sub will offer Inacom the right to procure
such products from its own channels. Inacom shall be responsible for product
sourcing cost increases resulting from instances where Compaq has a distribution
agreement with a particular vendor, but product is unavailable, provided Inacom
has agreed to incur such additional costs.
4. Compaq and Compaq Sub agree that any marketing funds or other
vendor funding (including rebates) provided to Compaq by third party vendors for
sales of product to customers where Inacom acted as agent, shall be paid to
Inacom within a reasonable time following receipt by Compaq, provided that
Inacom agrees to independently satisfy any vendor requirements for such funding.
5. Inacom has provided Compaq Sub with a list of current and potential
accounts, attached hereto as an appendix to Exhibit 3, and Compaq Sub will
determine a credit limit and any other appropriate limitations or requirements
for each such account. To the extent that Inacom sells products within each
customer's credit limit, Compaq Sub will assume the credit risk. However, to the
extent that Inacom sells products in excess of any customer's credit limit,
Inacom must bear the credit risk. Inacom agrees that all payment terms for its
customer invoices shall be net 30 days from receipt of invoice by customer.
6. As part of its Procurement Services, Compaq Sub will provide
invoice and collection services for accounts receivable on product procured by
customers through Inacom from Compaq Sub under the name of Compaq Sub or Inacom
(as agent for Compaq Sub), whichever Inacom prefers. These invoice and
collection services will only be available for hardware and/or Procurement
Services. Inacom agrees to pay agreed upon fees for customer invoices that are
not paid when due in accordance with the Fee Schedule, to the extent the payment
period is in excess of the payment period calculated into the assumptions for
the Fee Schedule. Compaq's obligation for collections of accounts receivables in
this provision is only effective for hardware and Procurement Services delivered
by Compaq and sold by Inacom after the close of the Asset Purchase Agreement.
7. Inacom will not bear any inventory price protection risk. If Inacom
or a customer requires Compaq Sub to hold inventory beyond the normal stocking
period, then Inacom agrees to pay to Compaq Sub a price protection risk fee in
accordance with the Fee Schedule to the extent the inventory holding period is
in excess of the inventory price protection element calculated into the
assumptions for the Fee Schedule.
SECTION 1.3. Sales Agreement.
1. Compaq and Inacom will jointly develop Compaq-branded service
offerings for end users ("Services"). These services will be performed by Inacom
and will be sold through the Compaq sales force.
2. Compaq and Inacom have jointly developed and agreed on Rules of
Engagement, attached hereto as Exhibit 3, which include, among other things,
Relationship Management and Joint Account Planning. Compaq and Compaq Sub agree
(and agree to cause their affiliates) not to directly solicit, the Inacom
customers with contracts that include the purchase of Compaq hardware or a
demonstrated run-rate of the purchase of Compaq hardware, as set forth in
Exhibit 3, where Compaq's direct product sales and services offerings are
competitive with those offered by Inacom as of the date hereof, for a period of
one year from the date hereof, provided the customer continues to purchase
Compaq product from Inacom.
ARTICLE II.
MISCELLANEOUS
SECTION 2.1. Definitive Agreements; Binding Effect. The parties agree
to use their reasonable best efforts to complete definitive agreements with
respect to the matters described in Section 1.2 and Section 1.3 within 30 days
of the date hereof. Until superseded by such definitive agreements, this
Agreement shall be binding on the parties.
SECTION 2.2. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
If to Inacom, to:
Inacom Corporation
Attention: Xxxx Xxxxxxxx
0000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to Compaq or Compaq Sub, to:
Compaq Computer Corporation
00000 XX 000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 2.3. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(a)(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 2.4. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto.
SECTION 2.5. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement.
SECTION 2.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard to
the conflicts of law rules of such state.
SECTION 2.7. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
SECTION 2.8. Term. This Agreement shall terminate upon termination of
the Service Level Agreement in accordance with Section 5.7(a) or (b) thereof.
Following the first anniversary of the date of execution of the Asset Purchase
Agreement, the parties agree to renegotiate pricing for Procurement Services for
pricing periods to be mutually agreed to by the parties to the extent necessary
to ensure that pricing for Procurement Services remains competitively priced in
the marketplace for each of the parties.
SECTION 2.9. Single Agreement. This Agreement and the agreements
identified on Exhibit 4 hereto (this Agreement and such other agreements,
collectively, the "Operating Agreements") were entered into pursuant to the
Asset Purchase Agreement. The undertakings of each party hereunder and
thereunder constitute consideration for the undertakings of the other parties
under all of the Operating Agreements, and all of the Operating Agreements shall
constitute a single agreement. The material performance of the obligations of
each party under each Operating Agreement shall be a condition to the
performance of the obligations of each other party under each Operating
Agreement The rightful rejection of any Operating Agreement (which shall not
include an expiration or termination thereof) requires the rejection of all
Operating Agreements.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
Inacom Corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
Date: February 16, 2000
Compaq Computer Corporation
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and Group Manager
Date: February 16, 2000
ITY Corp.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
Date: February 16, 2000
Exhibit 1
PROCUREMENT SERVICES
Compaq Sub agrees to offer the following Procurement Services pursuant to this
Agreement:
Program Development & Management
Program Design
Scope of Work
Statement of Work
Process Alignment
Transition & Implementation
Technology Selection
Provide evaluation hardware
Establish hardware standards
Identification and cataloging of existing images
Create and implement design process
Design software images
Create software images
Create proof-of-concept system
Test and validate proof-of-concept system
Global Project Management
Single point of accountability
International standards
Order Fulfillment
Account Setup
Create account(s)
Implement financing methods & processes
Pricing and Availability
90-Day forecast
Client-specific purchasing
Client-owned inventory
Pre-customized inventory
Special bid pricing
Create and maintain client-specific pricing profiles
Assign and maintain client-specific SKUs
Create and maintain convenience bundles
Pre-sales Consulting
Create & provide client-specific web-based catalog
Provide configuration manual
Provide live pre-sales support (standards only)
Provide live pre-sales support (any products)
Provide on-site pre-sales support
Order Creation
Create adhoc system order
Create adhoc order for upgrade/peripheral/supplies
Create refresh plan
Obtain Client internal approval
Generate purchase order
Order Entry, Confirmation, ETAs
Provide web-based order entry tool
Provide centralized order entry contact
Provide on-site order entry contact
Provide X.12 EDI connection to client system
Review order for completeness
Review order for technical correctness
Review order for credit availability
Release order on fulfillment system
Verbally confirm order and ETA to client contact
Electronically confirm order and ETA to client contact
Order Management
Ensure product acquisition and allocation
Answer order status inquires
Escalate issues
Advance ship notification (ASN)
Returns and DOAs
Track and review SLA compliance
Measure and report client satisfaction
Manufacturing and Customization
Manage image and instructions
Assemble system (JMAS)
Customize hardware
Third-party component setup
Partition/format fixed disk drives
Asset tagging and recording
Custom labeling or bar-coding
Install software
Operating System
Shrink-wrapped applications
Proprietary applications
Image load
Personalized system settings
IP address
Workgroup name
Other
Perform dial-out and/or leased line connectivity testing
Apply client-specific data via dial-out or leased line
Burn-in
Troubleshoot and repair image issues
Perform client-specific quality check
Logistics
Pick and pack/repack products
Special overpack
Design packing per client specifications
Acquire packaging
Pack orders per client specifications
Ensure shipment integrity
Ship/Deliver products
Standard ground
Three-day
Two-day
Next-day
Crisis transport service
Carrier-specific delivery
Time/place specific delivery
Invoicing and Reporting
Customized packing list
Provide proof-of-delivery (POD) confirmation
Standard invoice
Summary invoice
EDI invoice
Invoice acceptance
Payment generation (standard)
Payment generation (EFT)
Reports
Product Purchase
Purchase history
Standard vs. non-standard
By manufacturer
By business unit
Standards price list
Order Management
Daily Status Report
Backorder report - open orders
Proof-of-delivery (POD) Notification
SLA Performance
order turnaround
SLA attainment
Invoices
Invoices billed
Invoices paid
Asset Management feed
Client Satisfaction
Exhibit 2
FEE SCHEDULE
In addition to payment owed for hardware purchases as set forth in Section 1.2
of this Agreement, Compaq agrees that it will charge Inacom the following fees
for Procurement Services performed under this Agreement:
Procurement Services Base Fee ***% of invoice price per customer invoice
Additional Fees (Fees for special procurement and configuration services)
Total Compensation for Services ***% of invoice price per customer invoice
Compaq will retain ***% of the invoice price per customer order as total
compensation for services performed. The total services fee of ***% will be used
in calculating any agency fee payment owed to Inacom. The agency fee will be
calculated and paid monthly by Compaq Sub and adjusted quarterly to ***%. The
parties agree to negotiate appropriate SLA metric standards during 2000 to be
used to further adjust the quarterly fee rate to recognize changes in Inacom's
business and Compaq Sub's cost model.
SLA METRICS
The parties agree that the above fee structure (***%) will be adjusted
using the following SLA metrics to be agreed between the parties:
1. The percentage of Customization Fees charged to Inacom as compared to
the total revenue Compaq Sub invoiced for Inacom customers is TBD, as
based on Q399 numbers. The method to be used for this calculation will
be the Commission Cost Basis (CCB).
2. The percentage of Restock Fees charged Inacom as compared to the total
revenue Compaq Sub invoiced for Inacom customers customer is TBD, based
on Q399 numbers.
3. The percentage of Expedite Fees charged Inacom as compared to the total
revenue Compaq Sub invoiced for Inacom customers is TBD, based on Q399
numbers.
4. The percentage of Cancellation Fees charged Inacom as compared to the
total revenue Compaq Sub invoiced for Inacom customers is TBD, based on
Q399 numbers.
QUARTERLY ADJUSTMENT CALCULATION
Following the end of each calendar quarter, if the aggregate of the above
amounts are within plus or minus ***%of the baseline assumptions set forth
above, there will be no adjustment. If any of the above aggregate amounts are
greater than plus or minus ***% of the baseline assumptions, then an adjustment
will be made by Compaq Sub for the difference. This adjustment will be made at
the end of the Compaq Sub fiscal quarter and added or deducted from the agency
fee payment to Inacom. For example (these figures used in this example are for
illustrative purposes only):
Fee Type Q399 Baseline Current Quarter
-------- ------------- ---------------
Customization Fees TBD ***%
Restock Fees TBD ***%
Expedite Fees TBD ***%
Cancellation Fees TBD ***%
Total ***% ***%
1) The adjustment baseline is +/-***% (***% - ***%)
2) Current quarter deviation is -***% (***% - ***%)
3) Total fee adjustment -.04% (***% - ***%)
4) This .04% is a rebate (added to agency fee payment) to Inacom since the
current quarter is lower than the Q399 baseline
The quarterly adjustment will be made following the end of the third month of
the applicable Compaq fiscal quarter. The adjustment will include any adjustment
accrued during the first two months of the quarter.
Compaq Sub reserves the right to pay agency fees when invoices are collected
from Inacom customers, as indicated in Section 1.2 of the Agreement.
Exhibit 3
Rules of Engagement for Field Purpose
Working proactively with Inacom to create a consistent engagement process when a
current Inacom/Compaq customer is at risk. Designed to facilitate communication
needed to best serve customers and to facilitate customer choice, where each
party will act unilaterally.
Guiding Principles
Allow customer choice for manufacturer or reseller (Direct or Indirect) in an
end customer's decision making process.
While remaining competitors, Compaq will operate in a consistent, predictable &
fair manner with Inacom.
As required by Asset Purchase transaction, Compaq will not directly solicit
listed accounts for one year. If customer requests Compaq to sell directly to
the account, Compaq will follow agreed upon escalation path.
Through proactive planning and review activities, Compaq and Inacom will work
together to grow market share for Compaq, and proactively put plans in place to
effectively compete against Compaq product competitors in existing and
identified partnership accounts.
All special product pricing from Compaq will be managed by Compaq Field Team
exclusively (each party sets its own pricing independently).
It is very important we follow the rules of engagement. They are designed to
ensure consistency of approach to Compaq/Inacom joint customers.
Rules of Engagement (XXX)
The companies will continue to operate as separate entities until the
acquisition is complete (expected during 1Q00) and continue to compete
aggressively.
Post acquisition, Compaq and Inacom will work together to communicate the joint
value proposition in the new partnership.
Compaq and Inacom will publish a list of existing and identified partnership
accounts for their field sales organizations.
Upon completion of the acquisition, Compaq will proactively engage in account
planning sessions with Inacom for existing and identified partnership accounts
to determine the current account state, opportunities to partner, and agreed
upon strategy to partner. Pricing, margins, and profitability shall not be
discussed.
An escalation path will be communicated between the companies to process
customer requests to move to a direct model in existing and identified
partnership accounts.
A post acquisition Program Office will be established to be the final point of
escalation for any issues and to answer questions. The goal of the Program
Office will be to ensure customer satisfaction, communicate changes to current
incumbency, and to do due diligence around issue resolution for the Customer
Engagement Process. Due diligence includes making sure that the XXX have been
followed, and communication occurred between Inacom and Compaq, but each party
shall act unilaterally.
Next Steps
Develop a Communication Plan with timeline for internal and joint
communications.
Identify and communicate a framework for the Account Planning Process. Output to
include a one page document designed to review current account state,
opportunities to partner, and agreed upon strategy to partner.
Create and communicate a joint value proposition to be used by field teams for
customer communication.
Post acquisition, communicate the defined Escalation Path. (see below)
o Compaq Area Director/Inacom District Director of Sales (48 hours Response)
o Compaq Regional Vice President/Inacom Area Vice President (48 hours Response)
o Program Office (Xxx Xxxxxxxxxx/Xxxx Xxxxxxxx/Xxxxx Xxxxxxxx)
Finalize dates to manage a quarterly review of account status by the Program
Office for existing and identified partnership accounts.
Appendix - List of Accounts ***
EXHIBIT 4
OPERATING AGREEMENTS
Separation and Sharing Agreement
InaCom Services Service Level Agreement with Compaq Computer Corporation and the
other agreements referred to therein
